The Haney Group on the Second Great Depression Myth

All knowledgeable D.C. types know that the TARP and Fed bailout of Wall Street banks five years ago saved us from a second Great Depression. Like most things known by knowledgeable Washington types, this is not true.

Just to remind folks, the Wall Street banks were on life support at that time. Bear Stearns, one of the five major investment banks, would have collapsed in March of 2008 if the Fed had not been able to arrange a rescue by offering guarantees on almost $30 billion in assets to J.P. Morgan.

Fannie Mae and Freddie Mac both went belly up in September. The next week Lehman, another of the five major investment banks did go under. AIG, the country's largest insurer was about to follow suit when the Fed and Treasury jury-rigged a rescue.

Without massive government assistance, it was a virtual certainty that the remaining three investment banks, Goldman Sachs, Morgan Stanley, and Merrill Lynch, were toast. Bank of America and Citigroup also were headed rapidly for the dustbin of history. It is certainly possible, if not likely, that the other two giant banks, Wells Fargo and J.P. Morgan, would have been sucked down in the maelstrom.

In short, if we allowed the magic of the market to do its work, we would have seen an end to Wall Street as we know it. The major banks would be in receivership. Instead of proffering economic advice to the president, the top executives of these banks would be left walking the streets and dodging indictments and lawsuits.

This was when they turned socialist on us. We got the TARP and infinite money and guarantees from the Fed, FDIC, and Treasury to keep the Wall Street crew in their expensive suits. All the politicians told us how painful it was for them to hand out this money to the wealthy, but the alternative was a Second Great Depression.